Weber v. PNC Invs. LLC, 2:19-cv-00704
| Decision Date | 05 February 2020 |
| Docket Number | 2:19-cv-00704 |
| Parties | DOMINIK WEBER, Plaintiff, v. PNC INVESTMENTS LLC, Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
Justice Felix Frankfurter once wrote: "Wisdom too often never comes, and so one ought not to reject it merely because it comes late." Henslee v. Union Planters Nat'l Bank & Tr. Co., 335 U.S. 595, 600 (1949) (Frankfurter, J., dissenting). The problem for Plaintiff Dominik Weber is that sometimes the Court is bound to reject late breaking ideas regardless of their wisdom. Weber brought a claim in arbitration against PNC Investments, LLC. He lost that claim, and now asks this Court to overturn the arbitration award because two (2) of the three (3) arbitrators who presided in his case should have been excluded based on the terms of Weber's contract with PNC Investments. For PNC Investments, this is the first its hearing of Weber's concerns. That is because Weber never raised the issue during his arbitration, despite having the opportunity to do so. Under binding Third Circuit precedent, Weber waived the right to object now. And Weber's second ground for vacatur—that PNC Investments is a state actor bound by the Pennsylvania Constitution's Due Process Clause—lacks merit. For these reasons, and those that follow, Weber's Motion to Vacate (ECF No. 1), is DENIED, and PNC Investments' Cross-Motion to Confirm (ECF No. 18), is GRANTED.
The facts underlying Weber's claims against PNC are mostly outside of the Court's tasks today. Yet they provide some helpful context. Weber started working for PNC Bank as a teller at a branch in North Hills, Pennsylvania in late 2014. He earned several promotions, and in 2016 a new opportunity for advancement arose. That is when PNC Investments LLC, a wholly owned subsidiary of PNC Bank, sponsored Weber to take the Financial Industry Regulatory Authority ("FINRA") Series 7 and 66 license exams.1 Passing those exams would make Weber eligible for promotions that required the FINRA securities licenses.
Weber passed his Series 7 exam in June 2014, and signed up to take his Series 66 exam that coming September. (ECF No. 1, at ¶24, 34.) As part of the Series 7 licensing process, Weber signed a FINRA Uniform Application for Securities Industry Registration—or as it is known in finance industry jargon, a Form U4. (Id. at ¶¶25-26.) Weber's Form U4 included an arbitration agreement, providing that the FINRA Code of Arbitration Procedure for Industry Disputes ("FINRA Rules") would apply in any future arbitration.2 (Id. at ¶28; ECF No. 18-1.)
FINRA arbitration rules differ depending on who is involved in the claim. When an "associated person," like Weber, brings a claim against a FINRA member firm, FINRA Rule 13402(b) applies. (ECF No. 1, at ¶126.) Under that rule, if Weber took PNC Investments toarbitration, the panel hearing the claim would be made up of three (3) arbitrators—one (1) non-public arbitrator and two (2) public arbitrators. (Id. at ¶134.) One (1) of those public arbitrators would serve as the panel's chairperson. (Id.) The FINRA Rules define both "non-public arbitrator"—basically, a financial services industry insider—and "public arbitrator"—someone with much more limited connection to the financial services industry. See FINRA Rule 13100(r), (x).
Weber signed the Form U4 in May 2016. (ECF No. 18-1.) What happened in the following months is a matter of substantial disagreement between the Parties. Weber claims that shortly before he was to sit for his Series 66 exam, he complained to his supervisor about what he considered to be improper sales practices occurring at PNC Bank. According to Weber, he became the target of hostility and conspiracy for raising the complaint. (ECF No. 1, at ¶¶36-125.) PNC Investments, on the other hand, claims that throughout the late summer and early fall of 2016, Weber lied to his supervisors on several occasions about varying topics. His repeated lies, PNC Investments says, led the company to open a human resources investigation into Weber. (ECF No. 18, at ¶¶5-11.) Both Weber and PNC Investments do agree on what followed: PNC Bank fired Weber in early October 2016. (ECF No. 1, at ¶68; ECF No. 18, at ¶11.)
Here is where the facts become most relevant to today's task: in January 2017, Weber filed a Statement of Claim with FINRA—and later filed an Amended Statement of Claim that February. (ECF No. 1, at ¶¶103, 120.) Weber claimed that PNC Investments and PNC Bank defamed him and intentionally interfered with his prospective contractual relations. Bound by his Form U4 arbitration agreement, Weber's claim proceeded under FINRA's arbitration rules—meaning that two (2) public and one (1) non-public arbitrators would hear his claim. Under the FINRA Rules,Weber and PNC Investments3 had an opportunity to choose the three-arbitrator panel from a FINRA selection list. (Id. at ¶131.) Because this case turns on who knew what and when, the sequence of events, starting with FINRA sending the arbitrator selection list to the Parties and ending with the Panel's award, matters a great deal. And as to these events, the Parties are in agreement as to their substance and timing.
April 12, 2017—FINRA sent a list of potential arbitrators to the Parties. That list included ten (10) potential non-public arbitrators, ten (10) potential public arbitrators, and ten (10) potential public chairpersons. FINRA's correspondence informed Weber and PNC Investments of their right to rank and object to the potential arbitrators. Also included in FINRA's correspondence were the disclosure forms for each potential arbitrator—including Gregory Mathews, who ultimately served as the public chairperson for Weber's hearing. Mathews's report disclosed prior employment with Wachovia Corporation as a senior vice president and in-house counsel, and as an attorney for the Securities and Exchange Commission ("SEC") in the late 1970s and early 1980s. (ECF No. 18, at ¶¶17-19; ECF No. 18-7, at 2.) Notwithstanding Mathews's legal work for Wachovia and the SEC, Weber did not object to Mathews's classification as a potential public chairperson.
May 5, 2017—After the Parties sent in their rankings and objections, FINRA compared the lists and selected the three (3) panelists. Gregory Mathews would serve as the public chairperson, William Ryan as the public arbitrator, and Joseph Schwaba as the non-public arbitrator. (ECF No. 1, at ¶¶150, 153; ECF No. 18, at ¶18.) Weber did not object to any of the arbitrators' classifications.
June 3, 2017—Ryan, after being selected as the public arbitrator, provided his Oath of Arbitrator. That form, meant to ensure that arbitrators comply with certain ethical obligations,elicited three (3) relevant disclosures. First, Ryan informed Weber and PNC Investments that he had checking and savings accounts with PNC Bank. Second, he informed the Parties that his company used PNC Bank as well. Third, he told the Parties that his son worked as a teller for PNC Bank for a little over a year before recently being promoted to an operations analyst. Ryan affirmed that none of those facts would influence his decision in Weber's case and remained classified as a public arbitrator. He also affirmed that he had no involvement with PNC Investments. (ECF No. 18-9, at 14.) Two (2) weeks later, FINRA provided Ryan's Arbitrator Disclosure Report, which flagged the same three (3) conflicts. (ECF No. 18-10, at 2-3.) Weber did not object to Ryan's classification as a public arbitrator.
July 30 to August 13, 2018—FINRA scheduled Weber's Arbitration to last five (5) days beginning on July 30. But when it came time to begin the arbitration, Schwaba—the non-public arbitrator selected for the panel—was nowhere to be found. (ECF No. 1, at ¶178.) PNC Investments refused to proceed with only Mathews and Ryan hearing Weber's claim, so FINRA continued the proceeding. (Id. at ¶179.) With Schwaba out of the picture, it was "next man up." FINRA went back to the Parties' arbitrator selection lists and appointed Peter Marcoline as the new non-public arbitrator.4 (Id. at ¶¶180-83.) Back at a full roster of arbitrators on the panel, FINRA rescheduled Weber's hearing for late January 2019.
January 8, 2019—Shortly before the rescheduled hearing, FINRA provided an updated disclosure report for Mathews, current through late September 2018. That updated report informed Weber and PNC Investments that Mathews was counsel for a group of plaintiffs in a Ponzi scheme-related civil case litigated during 2017 and 2018. Aside from that piece of information, Mathews'sdisclosure report remained materially unchanged, so the arbitration proceeded as scheduled with Mathews as the public chairperson. (ECF No. 18-8, at 9.) Weber still did not object to Mathews's classification.
January 28 to 31, 2019—Mathews, Ryan, and Marcoline (collectively, "the Panel") presided over Weber's hearing. At the beginning of the hearing, after confirming that his and his fellow panelists' disclosures were up-to-date, Mathews asked counsel whether they knew "of any reason why th[e] Panel should not be confirmed." PNC Investments' counsel answered: "None." And Weber's counsel answered: "None for the Claimant." (ECF No. 18-13, at 5:19-6:22.) With that, the Panel began hearing Weber and PNC Investments' arguments, listening to their witnesses, and taking their exhibits.5 Four (4) days after it began, Weber submitted his case to the Panel for a decision and the hearing closed. (ECF No. 1, at ¶187.)
February 13, 2019—The events of this date are the meat of the matter. Two (2) weeks after Weber's hearing concluded, but before the Panel issued its award, FINRA informed the Parties that "Ryan's classification has changed from Public to Non-Public." He would "remain on the panel," because FINRA stated the "reclassification will apply to the arbitrator's future case appointment, and does not affect the arbitrator's...
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